Liberty Holdings Limited. Integrated report. For the year ended 31 December

Transcription

1 Liberty Holdings Limited 2017 Integrated report For the year ended 31 December

2 OF WORKING EVERY DAY FOR YOUR ONE DAY NORMALISED HEADLINE EARNINGS NORMALISED RETURN ON IFRS EQUITY R2,7bn 8% 12,3% (2016: 11,4%) LONG-TERM INSURANCE INDEXED NEW BUSINESS R8,0bn 2% NORMALISED GROUP EQUITY VALUE PER SHARE R140,31 4% LIBERTY GROUP LIMITED CAR COVER GROUP ASSETS UNDER MANAGEMENT 2,92x (2016: 2,95x) R720bn 7% WE ARE FULLY COMMITTED TO GENERATING COMPETITIVE SUSTAINABLE VALUE FOR OUR SHAREHOLDERS WE UNDERSTAND THAT THIS REQUIRES MUTUALLY BENEFICIAL PARTNERSHIPS WITH KEY STAKEHOLDERS

3 INTEGRATED REPORT CONTENT HIGHLIGHTS FLAP INTRODUCTION About our 2017 integrated report IFC Assurance and approval 1 Value creation through partnerships 1 Material focus areas 2 EXTERNAL ENVIRONMENT 3 CHAIRMAN S AND GROUP CHIEF EXECUTIVE S REVIEWS 5 ABOUT LIBERTY Who we are 8 Liberty's refreshed strategy 9 Our business model 14 Organisational structure 15 Our value chain 16 GOVERNANCE AT LIBERTY Governance at Liberty 19 Governance structures at Liberty 21 Board standing committees and membership 25 Risk management 27 Summary of remuneration or directors and prescribed officers 29 Investors provide our financial capital 32 Creating value for our customers 44 Our people our most valuable asset 54 Regulators regulatory framework for industry value 62 Building valuable partnerships with communities 69 INTEGRATED PERFORMANCE REVIEW 2017 performance dashboard and 2018 targets 77 IFRS results 78 Extracts from our annual financial statements 79 OTHER INFORMATION Contact and company reference details 82 Forward-looking statements 82 OTHER WEB CONTENT AVAILABLE IN PRINT AS A PDF MORE ON ABOUT LIBERTY Legal entity structure Analysis of ownership GOVERNANCE AT LIBERTY In-depth review of Corporate Governance APPLICATION OF THE KING IV PRINCIPLES REMUNERATION REPORT Background statement Overview of remuneration policy Implementation report REPORT TO SOCIETY Place customer at the heart of our business decisions Attract, develop and retain quality employees and financial advisers Enhance social relationships Provide responsible financial services Deliver sustainable financial results Statement of assurance GRI standards content index LIBERTY HOLDINGS LIMITED ANNUAL FINANCIAL STATEMENTS AND SUPPORTING INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2017 FINANCIAL RESULTS PRESENTATION Including: Group equity value report South African covered business embedded value SIX-YEAR REVIEW OR ONLINE NOTICE OF ANNUAL GENERAL MEETING AND PROXY FORM This integrated report is also available online as a PDF and references additional information contained in either the annual financial statements and supporting information for the year ended 31 December 2017, other reports in our reporting suite or other online supplementary information. NAVIGATION WITHIN THIS REPORT Additional information to the integrated report has been referenced as follows: IR Directs readers to the page in the integrated report with supplementary information. Refers to more detailed information available online at Throughout this report - Liberty Holdings Limited and its subsidiaries is referred to as 'Liberty' or the 'group'; Liberty Holdings Limited is referred to as the 'company'; Standard Bank Group Limited and any subsidiary (excluding Liberty) is referred to as 'Standard Bank Group' Back to contents page button

4 INTRODUCTION ABOUT OUR 2017 INTEGRATED REPORT Although this integrated report is primarily addressed to our shareholders, as the providers of financial capital, all stakeholders are invited to review it. This report illustrates how Liberty creates, delivers and safeguards value for all its stakeholders and how we deliver on our purpose of improving people s lives by making their financial freedom possible Scope and boundary Our integrated report is published annually. This integrated report covers the performance of Liberty Holdings Limited and its subsidiaries for the year ended 31 December Any material events up to the board approval date on 26 March 2018 are also included. Liberty is a South African company with a presence in sub-saharan Africa. As most of our operations are conducted in South Africa, these make up the majority of this report. Materiality We focus on reporting material aspects that impact our ability to be commercially viable and socially relevant in the communities in which we operate. Material aspects are defined as our material focus areas and any significant developments that would influence an assessment of Liberty's performance or opportunities. Capital resources are consumed in achieving our vision. We report on our allocation of the various capital resources and our ability to replenish them. This is done through qualitative commentary, supported by key indicators. Frameworks and other reports This report is prepared under the guidance of the International Integrated Reporting Framework (<IR> Framework) as adopted by the board. It conforms with the requirements of the Companies Act No. 71 of 2008 and the Johannesburg Stock Exchange (JSE) Listings Requirements. This report provides an entry point for more detailed information contained in other reports which comprise our annual reporting suite. These reports and the symbols used to cross-reference to them from the integrated report are: GOV REM AFS RS KIV Governance at Liberty Remuneration report Annual financial statements (incorporating risk management) Report to society King IV report Our management reporting processes and our suite of reports are aligned with the reporting principles of the King IV report on corporate governance for South Africa 2016 (King IV). Our integrated thinking is reflected in our targets and key performance indicators that cover financial and non-financial performance as well as strategy, risks and how we deliver value to stakeholders.

5 Liberty Holdings Limited Integrated Report ASSURANCE AND APPROVAL INTRODUCTION Assurance The board, in conjunction with the group audit and actuarial committee, is ultimately responsible for Liberty s system of internal control. Liberty applies a combined assurance approach, ensuring that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decisionmaking and its external reports. PwC issued an unmodified audit opinion on the group s annual financial statements and an unmodified assurance opinion on the group equity value report and checked the accuracy of these extracts included throughout this report. In addition, PwC provided a limited assurance report on selected other information contained in this report. The various levels of assurance received on reported information has been indicated in the partnerships and performance section and the integrated performance review as follows: A Full assurance provided by PwC L Limited assurance expressed over selected key performance indicators provided by PwC V Broad-Based Black Empowerment information verified by Empowerdex Economic Empowerment Rating Agency (Empowerdex) (South African operations only) Directors approval The board acknowledges its responsibility to ensure that reports issued by Liberty enable stakeholders to make informed assessments of its performance and its short, medium and long-term prospects. It also acknowledges its responsibility to ensure the integrity of Liberty s external reports, including the 2017 integrated report. The board believes it has fulfilled these responsibilities. The board further believes that the integrated report is presented in compliance with the <IR> Framework. The directors have applied their judgement to the disclosure of Liberty s strategic plans and ensured that these disclosures do not place Liberty at a competitive disadvantage. The board unanimously approved this report and authorised its release on 26 March JH Maree Chairman DC Munro Group chief executive VALUE CREATION THROUGH PARTNERSHIPS We value the partnerships we have with our stakeholders. It is through these partnerships, their establishment, preservation and enrichment, that Liberty creates value for its customers and other stakeholders. Partnerships require each partner to contribute to the relationship. Successful partnerships are those where each partner believes it is receiving value from the other equal to or greater than their own contribution. This report examines the contributions from stakeholders and the value derived through these partnerships. What Liberty gives and what Liberty receives are the inputs and the outputs of our business model. We strive to ensure that the outcomes from our business activities are positive enabling financial freedom for our customers, delivering sustainable financial results for our shareholders, developing a motivated and committed workforce, growing national savings, and building trust in the Liberty brand. Where outcomes are negative or anticipated to be negative, and after considering the trade-off of positive and negative outcomes, we take appropriate remedial action to minimise or eliminate such outcomes. All stakeholder groups provide Liberty with capital a variety of financial, physical and intangible resources. The allocation, utilisation and continuous replenishment of these capitals in a sustainable manner is fundamental to our ability to deliver on our purpose of improving people s lives by making their financial freedom possible. Liberty considers financial, human, intellectual as well as social and relationship (brand trust) capitals as the most significant resources. Liberty is not a significant consumer of natural resources, however, we are committed through our investment criteria to promote responsible utilisation of natural resources.

6 2 Liberty Holdings Limited Integrated Report 2017 INTRODUCTION MATERIAL FOCUS AREAS For each of our key partnerships we have identified a material focus area: Place customers at the heart of our business decisions Attract, develop and retain quality employees Provide responsible financial services Enhance social relationships Deliver sustainable financial results CUSTOMERS OUR PEOPLE REGULATORS COMMUNITIES INVESTORS Customers purchase our products and services. Our financial advisers support these purchase decisions by providing relevant and responsible advice Our people supply the necessary skills and expertise to deliver on our promises to stakeholders Regulators govern financial stability and market conduct for our industry (Regulators include government agencies and industry associations) Communities provide us with our social relevance, future customers and employees Investors provide our financial capital LIBERTY PRIORITISES ONGOING SUSTAINABILITY ABOVE SHORT-TERM MAXIMISATION OF PROFITS These material focus areas support our thought and reporting processes, our governance and strategy development. Each focus area impacts on the group s ability to create value in the short, medium and long term. RS Refer to the Report to society for more details of the process undertaken in reviewing and confirming Liberty's material focus areas Each material focus area is composed of several smaller but important issues that are relevant to stakeholders. These issues are identified through ongoing stakeholder engagement facilitated by Liberty s stakeholder engagement unit and are aligned with Liberty s organisational purpose, brand ethos, values and strategy. The frequency of engagement varies according to each stakeholder group and the issue at hand. Liberty is proactive in identifying and responding to its stakeholders legitimate expectations, concerns and conflicts. Liberty s customer facing units engage directly with customers and potential customers in each of the areas and identify customer concerns and take appropriate action. A centralised approach to stakeholder engagement is used to manage investors, employees, regulators and communities. The board of directors is kept apprised of engagement activities, concerns raised and mitigating action taken through the social, ethics and transformation committee. We focus on ensuring that the right relationship owners are in place in each business area and that engagements are held at the right levels, with the content of engagements being mutually beneficial. GOV Refer to Governance at Liberty for more details of the activities of our stakeholder team in 2017 Our bi-annual stakeholder sentiment survey aims to determine stakeholders perceptions of Liberty, our products and services and the overall way we conduct the business. This survey enables us to better understand the needs and expectations of our key stakeholders. The latest survey, performed in 2016 was reported on in the 2016 integrated report. The next survey will be conducted in 2018.

7 Liberty Holdings Limited Integrated Report EXTERNAL ENVIRONMENT ITS IMPACT ON OUTCOMES AND MATERIAL FOCUS AREAS EXTERNAL ENVIRONMENT Each of the three regions in which Liberty operates southern, east and west Africa, need their dominant economies South Africa, Kenya and Nigeria, to perform well to generate regional growth. These key economies are all facing challenges some external, but many internal. Addressing these internal challenges will provide the foundation necessary to achieve long-term, sustained economic growth. The steep decline in commodity prices (especially oil) in late 2014 demonstrated that many of the sub-saharan economies had failed to implement promised reforms, diversify their economies away from commodities, broaden the tax base, or benefit from growing regional trade. Both the West African economy, centred on Nigeria, and the East African economy centred on Kenya have not yet fully recovered from the decline in commodity prices. GDP ANNUAL GROWTH Percentage Economically, politically and socially South Africa experienced a very difficult The country s gross domestic product (GDP) growth rate approximated 1%. Despite a bumper agricultural season and firmer commodity prices, the South African economy continued to be held back by its internal dynamics, not least of which were the low levels of consumer and business confidence. BER * CONSUMER CONFIDENCE INDEX 5 0 (5) (10) (15) (20) MAR 14 DEC 17 Except for one quarter in June 2014, the BER Consumer Confidence Index has remained in negative territory for over four years, pointing to a low willingness of consumers to spend. BER * BUSINESS CONFIDENCE INDEX ,0 8,0 0 MAR 14 DEC 17 6,0 4,0 2,0 0 Similarly, except for the December 2014 quarter, the BER Business Confidence Index has remained below the neutral position of 50 for several years. * Bureau for Economic Research (2,0) (4,0) Kenya Nigeria South Africa Source: World Bank 2018 It is estimated that this lack of confidence reduced the annual growth rate by some 1,5% as consumers and businesses alike are reluctant to access credit, invest in capital items and replacement capital expenditure. Unlike many economies where lower consumer confidence leads to higher savings levels, this is not the case in South Africa. It is estimated that an annual growth

8 4 Liberty Holdings Limited Integrated Report 2017 EXTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT ITS IMPACT ON OUTCOMES AND MATERIAL FOCUS AREAS (CONTINUED) rate of at least 2% is required to generate jobs and grow GDP per capita, encouraging savings and generating new business for the savings industry. Difficult economic conditions impact on all stakeholders: results for shareholders; confidence and disposable income for customers and employees alike; and generally more difficult times for society. Increased confidence will see businesses invest in both expansion projects and the renewal and replacement of existing capacity. As the government s fiscal position deteriorates and state-owned enterprise s infrastructure spend is curtailed, these investments can only be completed by the private sector. RAND/DOLLAR ZAR 14,5 14,0 13,5 13,0 12,5 12,0 An improved performance by the South African equity markets in the fourth quarter of 2017, was driven by increasing confidence in global economic growth and positive political developments. 11,5 11,0 JAN 17 DEC 17 In the short term it is hoped that government will focus on improving the fiscal position in many of the large state-owned enterprises, including Eskom, as well as strengthening key institutions such as National Treasury and the South African Revenue Services. Under these circumstances it is possible for the country to avoid any further rating downgrades. Moody s remains the only major credit rating agency to assign South Africa an investment grade rating for both its long-term foreign debt as well as its long-term domestic debt. JSE ALSI Points Source: SARB In the beginning of 2018 the South African Reserve Bank (SARB) revised its 2018 and 2019 forecast for gross domestic product up to 1,4% and 1,6% respectively, from 1,2% and 1,5% previously. The sharp improvement in the rand exchange rate, which appears sustainable in the short to medium term, has led to a more positive inflation outlook. Consumer inflation is expected to remain well inside the target of 3,0% to 6,0% during 2018 and is forecast to average less than 5,0% for the year as a whole, down from an average of 5,3% in 2017 and 6,3% in The latest downward revision to the inflation forecast coupled with still subdued economic growth could open the door for the SARB to cut interest rates modestly into the middle of 2018, after which interest rates could then remain unchanged into JAN 17 DEC 17 Source: JSE

9 Liberty Holdings Limited Integrated Report CHAIRMAN S REVIEW I am confident that initiatives to address our immediate challenges and a refreshed strategy will guide us to success. CHAIRMAN S AND GROUP CHIEF EXECUTIVE'S REVIEWS JACKO MAREE Chairman The year in review 2017 was a year of significant change at Liberty and saw the appointment of a new group chief executive, David Munro, in May. The board spent many hours deliberating on the change of leadership and then engaging with David and his team on the way forward. Actions were immediately taken to urgently start addressing Liberty s short-term challenges. These are clearly set out as the triage initiatives on page 12. Eight workstreams were then established to refresh the long-term strategy required to grow the business sustainably. These are well articulated on pages 9 to 11. As you read the group chief executive s review and the pages that follow, I hope that you will gain a sense of confidence that we are back on the right track, but with a long journey ahead. Liberty s 2017 financial performance reflected a marginal improvement over the previous year although the value of new business and margin were well below expectation. The group s capital position has remained strong and the dividend has been maintained. I am encouraged by our renewed focus on our customers and financial advisers, making our product offerings more relevant to their changing needs and simplifying their experiences whenever and however they engage with us. I am confident that the initiatives to address our immediate challenges and a refreshed strategy will guide us to success. The board will support management but also challenge them and closely monitor progress in their endeavours. Board composition and governance On 30 May 2017, Thabo Dloti resigned as chief executive as part of a mutual separation agreement. Thabo left Liberty following a difference of opinion with the board on the immediate focus of the company at a time when the organisation was facing tough operational and environmental challenges. David Munro was appointed as a non-executive director on 15 February 2017 and assumed the role of group chief executive of Liberty on 30 May Peter Moyo and Mike Ilsley resigned from the board on 3 April and 31 July 2017 respectively. Casper Troskie, the financial director, resigned on 31 December These directors made important contributions during their time at Liberty and it was therefore disappointing that they all chose to join one of our major competitors. We nevertheless thank them and wish them well. We welcomed Nooraya Khan to the board as an independent director on 15 December 2017 and look forward to the additional perspectives she will bring to board deliberations. We were also pleased to announce the appointment of Yuresh Maharaj as financial director on 12 February We remain conscious of the need to enhance board diversity and accordingly the board reviewed and updated its diversity policy to clearly articulate our approach. The board is committed to maintaining the percentage of female representation on the board above 30%. The directors affairs committee reviewed progress with the implementation of the King IV Report on Corporate Governance for South Africa. A separate report in response to the disclosures proposed in the King IV Report is available on the company s website. Appreciation We are working hard to place our customers and financial advisers at the heart of everything that we do. My thanks go to them for their continued support and faith in Liberty. I would like to sincerely thank all our people for their hard work and commitment during a challenging year. Their ongoing efforts will enable us to build a more successful future. Following a year of change, my thanks go to my fellow board members who have been called upon and made themselves available, at short notice and at times beyond the normal call of duty, to support the group chief executive and executive committee in strengthening Liberty and enhancing its competitiveness. To our investors, I greatly appreciate your patience. Following the actions taken to improve profitability and place the group on a sound strategic footing, I am confident that Liberty will emerge with significantly greater potential to grow shareholder value. JH Maree Chairman 26 March 2018

10 6 Liberty Holdings Limited Integrated Report 2017 CHAIRMAN S AND GROUP CHIEF EXECUTIVE'S REVIEWS GROUP CHIEF EXECUTIVE S REVIEW Liberty has all the ingredients for success. It s an incredibly exciting time to be part of this journey. It is up to us as the Liberty team to deliver this success, and we are determined to do so. DAVID MUNRO Group chief executive A year of review and reflection During the nine months that I have served as Liberty s group chief executive, I have endeavoured to understand the business of Liberty, the role we play in the lives of our customers and their financial advisers and the challenges that our industry faces. I have met with both tied and independent financial advisers, with our customers and engaged with many team members from across Liberty s operations to understand our business and challenges. I have sought to build relationships with our board, shareholders and regulators. It is clear to me that Liberty has a fantastic core franchise, staffed by experienced and passionate people and served by a huge team of financial advisers all of whom want to see Liberty succeed. It is also clear that, over the last few years, Liberty has tried to do too many new things, all of which have added complexity to our business and distracted us from serving our customers and financial advisers. The choices that Liberty made in 2014, when it set out to achieve Strategy 2020, were informed by the context prevailing at that time. Three fundamental changes in our operating environment forced us to adjust our plans. These changes were the weak economic performance of our key markets, our own disappointing performance and Standard Bank Group embarking on a plan to become an integrated Universal Financial Services organisation. Accordingly, Liberty has refreshed its strategy and renewed its focus: We must restore our ability to successfully run a retail insurance business and STANLIB in South Africa We must put our customers and financial advisers back at the heart of everything that we do, and We will play an integral role in delivering Standard Bank Group's ambition of becoming the leading Universal Financial Services organisation in, for and across Africa. More details as to how we propose to achieve the above are provided in the refreshed strategy section of this report. Financial overview Weak economic growth in South Africa, an uncertain political environment leading to sovereign rating downgrades and a lack of employment creation during 2017 resulted in low consumer and business confidence. The year ended on a more optimistic note as evidenced by the local bond and stock market performance and significant rand strengthening in late December The group remained resilient during the year, maintaining the capital position of the group s main long-term insurance licence, Liberty Group Limited, with a capital adequacy ratio of 2,92 times the regulatory minimum. This remains at the upper end of the target range and underpins our commitment to continue to fulfil our promises to policyholders and other stakeholders. The group s South African covered insurance business continued to deliver positive operating variances and be managed to better than model supporting the core assumptions underlying the insurance book. The South African covered business embedded value was preserved, maintaining embedded value earnings of R2,8 billion compared to the prior year and generating a return of 8,2%. The value of new business (VoNB) and new business margin ended the year well below expectation. The improvement in VoNB in the second half of 2017, despite lower volumes, shows signs that the focused initiatives commenced in early 2017 are starting to deliver the desired outcome. Group equity value per share was lower at R140,31 (31 December 2016: R145,86). The lower group equity value per share was attributable to weaker earnings from the group s non-covered

11 Liberty Holdings Limited Integrated Report businesses, particularly within the STANLIB businesses and the resultant capitalised impact of reduced earnings. Long-term insurance indexed new business sales grew marginally to R8 billion. Competitive retail market pricing and the tough economic environment continued to place significant pressure on retail sales volumes. The bancassurance agreement with Standard Bank Group, which is applicable across the group s asset management and insurance operations, continues to make a positive contribution to new business volumes and earnings. The total indexed new business premiums sold under the agreement increased by 7% to R3,3 billion for the year. Normalised headline earnings for the year ended 31 December 2017 of R2 719 million were 8% up on 2016, supported by a higher contribution of R1 307 million (2016: R787 million) from the shareholder investment portfolio (SIP). The improved earnings contribution from Individual Arrangements was offset by the lower underwriting result from Liberty Corporate. STANLIB s earnings continued to be impacted by margin pressure due to a less favourable sales mix, costs associated with the termination of the institutional administration outsourcing programme, the launch of new franchises and operational write-offs. Normalised return on equity was 12,3% (2016: 11,4%). Key priorities and goals for 2018 In the light of these financial results, our priority is to improve the performance of the South African retail insurance business. Most critical to this is for us to work with our distribution force and partners to improve their ability to lift sales volumes dramatically. To do this we will need to continuously improve the quality of our product, the margin and mix within what we sell, and the service we provide to both customers and advisers. The key measure of our success will be growth in the VoNB. than anytime in the past five years, our financial advisers and distribution partners truly want to see Liberty succeed, and our strategy workstreams are working quickly towards implementable recommendations. Measurement of our progress is clearly critical, and we have adopted three financial performance metrics against which we will track our progress over the short to medium term. These are a VoNB margin range of between 1% and 1,5%, a normalised return on equity between 15% and 18% and a return on group equity value in excess of 12%. In summary, we have diagnosed the challenges, and introduced plans to address them and restore Liberty. We must now focus on executing these plans and with some good fortune, tough decisions and good timing, we should start to see our business turnaround. The 2018 year will be the workbench for this effort and hopefully by June we will begin to see some early fruits, and more evidence or progress by year end. The real evidence of our efforts will only be reflected in our 2019 and 2020 performance. It is up to us as the Liberty team to deliver this success, and we are determined to do so! Appreciation I would like to thank our staff and intermediaries for the warm welcome I received on my arrival at Liberty and for all your support and understanding during this trying time in our proud history. You deserve the greatest thanks for your continued commitment to our customers and your desire to improve the customer experience. I truly believe the next 60 years will see Liberty continue to fulfil its purpose improving peoples lives by making their financial freedom possible. CHAIRMAN S AND GROUP CHIEF EXECUTIVE'S REVIEWS Secondly, we must ensure that STANLIB delivers improved investment returns for its customers. This will be evidenced by improving quartile rankings of the largest franchises. Thirdly, we will implement a revised operating model that addresses the existing shortcomings of how Liberty is currently structured. We will also optimise the outcomes for each of the group s existing growth initiatives, namely Liberty Africa Insurance, Liberty Health, and our recently launched short-term insurance joint initiative with Standard Bank Group. Finally, we need to maximise our relationship with Standard Bank Group, contributing to its growth while leveraging off the capacity and resources at its disposal. Actions to achieve these goals have already been set in motion. Employee morale has seen a considerable improvement, the political and economic outlook for South Africa is brighter now D Munro Group chief executive 26 March 2018

12 8 Liberty Holdings Limited Integrated Report 2017 ABOUT LIBERTY WHO WE ARE Liberty is a financial services group that offers an extensive, market-leading range of products and services to help customers build and protect their wealth and lifestyle. Products include life, short-term and health related insurance, investment management and financial support for retirement. Liberty s financial advisers expertly equip customers with knowledge to make decisions that add value throughout their various life stages. Liberty is listed on the JSE and is part of the Standard Bank Group, which owns 53,6% of the issued ordinary share capital. Largest provider of long-term insurance solutions to South Africa s retail affluent market Bancassurance business agreements with Standard Bank Group, Africa s largest financial services organisation Strong capital base > full-time employees > tied financial advisers in a diversified multi-channel distribution network > retail policies in-force in South Africa > individual and institutional investment customers > corporate retirement schemes administered > R8,7 billion in death and disability claims paid in 2017 Represented in 25 African countries OUR PROUD HISTORY OF FIRSTS Liberty Life introduces the first retirement annuity products in South Africa Liberty Life is the first life assurance company to be listed on the Johannesburg Stock Exchange Liberty Life introduces South Africa s first life insurance benefits linked to unit trusts Our brands Liberty Life introduces the Liberty Property Bond series of policies Liberty Life introduces South Africa s first non racial share incentive scheme Liberty's Medical Lifestyle health policy, the first of its kind, is introduced Our purpose Improving people's lives by making their financial freedom possible 1995 Liberty Life introduces Blueprint, the first computerbased financial needs analysis in the industry 2010 STANLIB launches the first Inflation Plus Fund Liberty launches the Evolve product range with investment growth sharing Liberty launches the Agile product range which provides certainty of retirement income

13 Liberty Holdings Limited Integrated Report LIBERTY'S REFRESHED STRATEGY ABOUT LIBERTY We remain resolute in developing competitive value propositions for our customers, driving efficiency through simplifying our operations, managing risk appropriately, deploying capital effectively and pursuing profitable growth opportunities over the long term. Liberty's purpose and vision have been aligned with those of Standard Bank Group Our long-term strategy is to play an active role in the achievement of Standard Bank Group's vision Our immediate strategy is focused on delivering on two fronts Addressing existing challenges within the operations Structuring the business for future growth STANLIB INVESTMENT PERFORMANCE IMPROVEMENT SIMPLIFICATION FOR CUSTOMERS AND LIBERTY FINANCIAL TRANSFORMATION RISK AND COMPLIANCE ENHANCEMENT FINANCIAL PERFORMANCE REMEDIATION IR More details of the above initiatives are provided on page 12 PURPOSE Africa is our home, we drive her growth REFRESHED PURPOSE Improving people's lives by making their financial freedom possible VISION To be the leading financial services organisation in, for and across Africa, delivering exceptional client experiences and superior value. OUR CUSTOMERS ARE AT THE CENTRE OF WHAT WE DO REFRESHED VISION Transform Liberty to be the trusted leader in South Africa and chosen markets by delivering superior value through exceptional client and adviser experiences.

14 10 Liberty Holdings Limited Integrated Report 2017 ABOUT LIBERTY LIBERTY'S REFRESHED STRATEGY (CONTINUED) THE CASE FOR CHANGE The accelerating pace of change in several aspects of our chosen markets, the appointment of new leadership and our close association with Standard Bank Group has seen our strategy refreshed during PERFORMANCE EXTERNAL ENVIRONMENT ACCELERATIN G PACE O F C HA N GE UNIVERSAL FINANCIAL SERVICES ORGANISATION Liberty s Strategy 2020 was developed in 2014 and underwent a refocus in However, the pace of change and Liberty s performance demanded that management undertake a comprehensive review of our strategy. The four drivers of this refresh are: The economic fortunes of Africa have not continued on the rising trajectory anticipated. Growth momentum in the key sub-saharan African region remains fragile. Liberty s performance over the past two years has been disappointing. Poor investment performance from STANLIB, the group s reliance on earnings from the shareholder investment portfolio and the lower value of new business all need to be addressed. The closer relationship with Standard Bank Group places Liberty as an integral part of a universal financial services organisation focused on delivering exceptional customer experiences and superior value across Africa. The world around us is changing at an accelerating pace, driven in the main by the digital wave, and ongoing regulatory and governance developments.

15 Liberty Holdings Limited Integrated Report ABOUT LIBERTY STRATEGY EXECUTION During the refresh process we identified areas that require immediate action, areas where we need to adjust our focus and areas where we need to achieve significant changes to achieve long-term sustainable growth. The immediate actions were termed our triage initiatives and ran for several months in 2017 and will continue through IR These short-term initiatives are described on page 12. Our transformation journey will begin with the confirmation of our principles and values. This exercise is expected to be completed during the first quarter of With these in place, creating the Liberty of the future will commence in earnest. The development of Liberty s long-term strategy is being accomplished through eight workstreams which will recommend and develop firm proposals for the implementation of detailed strategic initiatives across the group, in customer facing units and support functions. The workstreams report fortnightly to the strategic oversight committee, which in turn reports to the executive committee monthly and the board quarterly. We are developing our long-term strategy through eight workstreams: Strategy cascade communicating the strategy to everyone in the organisation 1 5 Digital and data to harness the power of the digital world and the data resources in Liberty and Standard Bank Group Customer and financial advisers placing the customer at the heart of our business and understanding the critical role our financial advisers play 2 6 Brand and reputation communication, both within Liberty and outside, of the change in Liberty and the promises to both clients and financial advisers Architecture changing our operating model and structure to ensure we deliver exceptional experiences by putting the value chain back together and remove complexity from our business 3 7 Metrics and planning ensuring that we are measuring what is important to us and that we are making progress in our business and delivering on our promises People and culture the most important driver of our success changing our collective behaviour to place the customer at the heart of our business will drive our success 4 8 Standard Bank Group focused on ensuring that we systematically connect every part of our organisation with Standard Bank Group where there is an opportunity for leverage

16 12 Liberty Holdings Limited Integrated Report 2017 ABOUT LIBERTY LIBERTY'S REFRESHED STRATEGY (CONTINUED) TRIAGE INITIATIVES Our triage initiatives have been identified to address the here and now challenges faced by the group. While the successful execution of our long-term strategy will ensure Liberty achieves its purpose we must also meet our customers, shareholders and other stakeholders immediate expectations. Short-term or triage strategic initiatives, designed to address immediate operational and customer service challenges are: STRATEGIC PRIORITY CONTEXT OBJECTIVES STANLIB INVESTMENT PERFORMANCE IMPROVEMENT The investment landscape has evolved, resulting in a change in customer buying behaviour and asset manager business models. STANLIB has strong fixed income and listed property capabilities, but needs to build capacity in the higher margin and critical market share areas of asset allocation and equity. Attract and retain investment professionals in an increasingly competitive market for talent Implement a shared services platform to deliver operational efficiencies and scalability Ensure we offer the right set of investment propositions for customers that produce sustainable shareholder earnings through cycles Enhance the business and operating model to be more agile and less vulnerable to the impact of unfavourable external factors, and Foster an investment-led culture. SIMPLIFICATION FOR CUSTOMERS AND LIBERTY The current engagement model needs enhancement. In certain instances, there is duplicated effort, fragmented processes, limited transparency across processes and a large amount of manual intervention. Improve customer experiences and enable advisers Drive business efficiency, and Design the group architecture for the future. FINANCIAL TRANSFORMATION Over the years, the growth efforts of Liberty have increased the complexity and inherent risks within the business, which requires strengthening of the financial and actuarial control environments. Reduce the significant number of investment portfolios to simplify Liberty s operational processes, create efficiencies and provide clarity to customers Provide holistic capabilities to improve controls and enhance delivery and governance of financial operations Manage and maintain control over the outcomes delivered during a product s various life stages and reduce complexity, and Deliver on IFRS reporting requirements whilst optimising the balance sheet for the transition to IFRS 17 Insurance Contracts standards. RISK AND COMPLIANCE ENHANCEMENT A focused Risk and Compliance Enhancement Programme (RCEP) is in place to assist with effective and efficient implementation of the risk and compliance frameworks and enable the enhanced identification, measurement, treatment, monitoring and reporting of risk and controls. Ensure the execution of strategy Ensure the group is managed in a sustainable manner to deliver on its promise to the customer Facilitate compliance with all relevant legislation, regulation and acceptable market practice Meet the expectations of the board and management in the execution of their responsibilities, and Operate in a robust, effective and efficient manner on a continuous basis, ensuring compliance with internal controls, policies and procedures. FINANCIAL PERFORMANCE REMEDIATION The core businesses of Liberty (Individual Arrangements, STANLIB South Africa and Liberty Corporate) are under significant strain. While operating variances remain positive overall, Liberty s value of new business and margins are at historic lows. Reduce complexity Business management Revisit product design and pricing Improve sales and distribution effectiveness Improve expense management, and Develop brand and marketing strategies.

17 Liberty Holdings Limited Integrated Report ABOUT LIBERTY PRINCIPAL RISKS ASSOCIATED WITH LIBERTY S STRATEGIC OBJECTIVES Risks from both the external and internal environments have continued to emerge, with the most recent risks noted below together with our strategic responses: SPECIFIC RISKS STRATEGIC RESPONSE EXTERNAL Increased instability in the SA socio-political and economic environment. Slow growth in chosen markets. Liberty maintains a strong capital position, offers offshore investment alternatives to policyholders and manages its asset liability matching position within risk limits. Liberty undertook stress scenario tests in anticipation of the sovereign downgrade and the political events in December 2017 and clear actions were put in place to manage the possible outcomes. Liberty continues to create platforms for future growth in South Africa and chosen markets. Liberty will optimise the bancassurance agreement and leverage off its relationship with Standard Bank. INTERNAL EXECUTION Complexity of the business due to wide range of products, systems, processes and organisational structures. Inability to adapt the business model in response to the changing environment, including the lack of a commercially viable credible customer value proposition and the digital technology to respond to a disruptive, changing, competitive and tough economic environment. Lack of key capabilities to execute on the strategy. Poor investment performance relative to customer expectations Not taking full advantage of opportunities to optimise the value of the group Inadequate cyber-security and resilience Ineffective group operating model/group governance framework to manage businesses outside the core areas Inability to adequately respond to new and emerging regulation. Liberty has specifically structured its businesses to deal with this risk by formally defining strategic and financial goals. Particular focus areas are: Delivering a connected experience for customers and advisers. Leveraging technologies to be able to perform tasks normally requiring human intelligence. Liberty is building an agile capability to meet customer needs and reduce time to market. This includes continuously creating new customer propositions and enhancements to distribution channels. Liberty is concentrating on improving investment performance and ensuring that product development, client servicing and distribution are well resourced. Liberty is continuously refining and building new capabilities including people skills and continues to create partnerships to execute strategy. A sub-component of this risk includes the strengthening of the operational practices, processes and controls. Liberty has hence initiated a risk and compliance enhancement programme. Liberty continues to enhance investment capabilities particularly in STANLIB. Clear management actions have been put in place for key portfolios that are not performing according to expectation. Various programmes which aim to drive collaboration and alignment have been implemented within the group and with the holding company, Standard Bank Group. Liberty continues to invest in and rollout the group s information security and cyber-security frameworks and related policies. The group is in the process of enhancing the target operating model for the rest of Africa, including providing a clear governance structure to the subsidiary businesses. Liberty continues to develop strategic responses to new and emerging regulation. Furthermore, Liberty is in the process of enhancing the regulatory engagement models to better coordinate its responses and interactions with the regulator. The Retail Distribution Review, Recovery and Resolution Planning, anti-money laundering requirements in terms of the Financial Intelligence Centre Act and the Solvency Assessment and Management requirements are particularly noteworthy.

18 14 Liberty Holdings Limited Integrated Report 2017 ABOUT LIBERTY OUR BUSINESS MODEL Our business model is to sustainably utilise and grow available capital resources to create value by providing solutions to individuals (or represented groups of individuals) to meet their insurance risks and investment needs. In return we charge an appropriate fee or derive underwriting profits through pooling similar insurable risks, enhanced by optimising offsetting risks. We maximise our ability to generate revenue and deliver on our customer promise by producing innovative product solutions supported by effective distribution and servicing. ENTITY VALUE CREATION For many of our customers, Liberty s promise is everything. We make promises today that we may only need to honour 60 years from now. We could also be asked to fulfil that promise at any time. Consequently, the sustainable creation, preservation and growth of Liberty s entity value is central to our capacity to deliver on our purpose - improving people s lives by making their financial freedom possible. Delivering sustainable financial results is a material focus area for Liberty and the most critical. We acknowledge the important role all our partners play in achieving this goal, without which Liberty could not continue to fulfil its promises to customers, employees and other stakeholders. The creation of value for other stakeholders is either a by-product or a key input to creating, preserving and growing our entity value. INSURANCE UNDERWRITING PROFIT VALUE IS CREATED FROM THREE MAIN ACTIVITIES INVESTMENT INCOME ASSET MANAGEMENT PROFIT Contracted premium income for risks insured, less claims and related acquisition and service expenses (actual and expected over contract duration). Liberty provides insurance products for a variety of risk events and investment needs. Net investment income from shareholder investment market exposures (capital invested and derived exposures from insurance contract obligations), less group administration and strategic expenses. Performance and asset based fees earned for managing and administering customer mandates, less related acquisition and service expenses. STANLIB offers a range of products for individuals, families, groups and funds to invest for retirement. Products are also available for those customers that wish to invest either a lump sum or smaller amounts regularly. Details of the value drivers impacting on the insurance underwriting profit appear on page 36. Details of the value drivers impacting on the investment income appear on page 36. IR IR IR Details of the value drivers impacting on the asset management profit appear on page 36.

19 Liberty Holdings Limited Integrated Report ORGANISATIONAL STRUCTURE ABOUT LIBERTY To optimise our ability to achieve Liberty s strategic goals, our organisational structure focuses on our chosen customer segments and leverages group shared capabilities. CUSTOMER FACING UNITS INDIVIDUAL ARRANGEMENTS Individual Arrangements is responsible for the development, marketing, distribution, servicing and administration of retail insurance and retail investment products, in support of financial advice provided to South African customers. GROUP ARRANGEMENTS Group Arrangements provides insurance and investment solutions to aggregations of individuals including corporates, affinity groupings and retirement funds across sub-saharan Africa. ASSET MANAGEMENT STANLIB provides wealth and investment management solutions for individual and institutional investors. These include Liberty policyholders, third-party investors such as provincial governments, municipalities, state-owned enterprises, retirement funds and medical schemes, as well as individual investors. BANCASSURANCE Partnering with Standard Bank Group is a source of competitive advantage for Liberty, primarily from the perspective of expanding market share and the revenue base in South Africa and facilitating entry into new markets in the rest of Africa. The country-specific bancassurance business agreements between Liberty and Standard Bank Group are based on a master agreement which establishes the overall framework for bancassurance between the two parties. The country-specific operational agreements detail how bancassurance will be implemented in each country. The bancassurance agreements cover asset management, investment, short-term insurance and health products. STRATEGIC COMPETENCY UNITS LIBERTY FINANCIAL SOLUTIONS (LIBFIN) LibFin is a centre of excellence for the management of market, credit and liquidity risk, in addition to managing the performance of the shareholder investment portfolio in the life insurance business. GROUP DISTRIBUTION A group-wide advisory service and distribution capability for the customer facing units' product offerings through multiple channels. STRATEGIC SUPPORT PROVIDED BY GROUP GOVERNANCE AND EXECUTION

20 16 Liberty Holdings Limited Integrated Report 2017 ABOUT LIBERTY OUR VALUE CHAIN CAPITAL INPUTS PARTNERSHIPS FINANCIAL The group s share capital, accumulated reserves and debt funding R22,4 billion OF EQUITY CAPITAL R5,6 billion OF DEBT CAPITAL R17,3 billion OF RESERVES R59,7 billion OF CURRENT YEAR PREMIUMS AND INVESTMENTS RETURNS INTELLECTUAL Liberty s institutional knowledge, product development capability, systems, processes and practices EXPERIENCED BOARD AND EXECUTIVES TALENTED, SKILLED AND TRAINED WORKFORCE BANCASSURANCE PARTNERSHIP BALANCE SHEET MANAGEMENT CUSTOMISED SOFTWARE A COMPLIANT FINANCIAL SERVICES PROVIDER BRAND The trusted relationships and collaborations with our customers, regulators, communities and other stakeholders Strong brand with 60-year history Subsidiary of Standard Bank Group, Africa s largest financial services organisation by brand value and number of retail customers Recognised as specialists in markets we serve Increasing brand loyalty as measured by independent survey Ongoing commitment to transformation HUMAN Liberty s workforce of employees and tied agents > STUDENT AND FULL-TIME EMPLOYEES AND > TIED FINANCIAL ADVISERS IN A MULTI-CHANNEL DISTRIBUTION NETWORK QUALIFIED ACTUARIES CHARTERED ACCOUNTANTS NATURAL Renewable and non-renewable natural resources 27GW OF ELECTRICITY CONSUMED 117ML OF WATER CONSUMED 94kL OF DIESEL CONSUMED IN GENERATORS m 2 OF OCCUPIED OFFICE SPACE

21 LIBERTY S BUSINESS PROCESS CORPORATE GOVERNANCE Liberty has adopted and implemented effective governance structures and processes that provide for sound and prudent management and oversight of its business and adequately recognise and protect the interests of its policyholders and other stakeholders. Three separate and dedicated customer facing units allow us to focus on customers in our targeted market segments We optimise the allocation of our financial capital within a board approved risk appetite through the excellent balance sheet management capability within LibFin UNDERSTANDING OUR CUSTOMERS FINANCIAL NEEDS We optimise our intellectual and human capital through talent management programmes, reaching across each of the customer facing units and all support functions Our sources of liquidity exceed requirements substantial cash and liquid resources relative to technical reserves LEVERAGE OUR BALANCE SHEET STRATEGIC DIFFERENTIATORS DESIGN AND DEVELOP INNOVATIVE PRODUCTS AND SERVICES We engage with customers and prospective customers through our network of financial advisers and other access channels We help build people s investments, we help their children to attend school, help them to build homes and retire. We provide security as they live their hopes and dreams. FULFIL OUR PROMISES TO CUSTOMERS DISTRIBUTE PRODUCTS AND SERVICES IN CHOSEN MARKETS The bancassurance partnership with Standard Bank Group, Liberty s largest shareholder, provides synergies and advantages not available to other market participants RISK MANAGEMENT To ensure appropriate risk prioritisation and mitigation we identify the internal and external events (including stress and scenario tests, often in conjunction with Standard Bank Group and regulators) that may affect our strategies and potentially impact our results, capital and reputation.

22 Liberty Holdings Limited Integrated report ABOUT LIBERTY OUTPUTS OUTCOMES RESULTING CAPITALS R720 billion AUM Cost of debt 7,9% Death & disability claims > R8,7 billion STANLIB manages savings for more than customers Business operated within risk appetite Indexed new business R8,0 billion New business margin of 0,5% Enhanced financial needs analysis Responsible financial advice Financial literacy education programmes reached adults R41 million CSI spend in South Africa Security at Liberty premises and shopping centres Comprehensive stakeholder engagement Regulatory compliance R4,1 billion paid in salaries to full-time employees Capital adequacy ratio 2,92x Cost of equity 12,1% Other benefits paid - claim statistics R15,2 million invested in upskilling Skills and career development Comprehensive value-added benefits for employees Financial leverage Enhanced access to financial and human capital Competitive and risk-adjusted returns Confidence in Liberty s ability to meet contractual obligations Resilient capital position Long-term customer contract insurance persistency Responsible advice on financial needs Fair outcomes for customers Excellent customer service Customer satisfaction and peace of mind Over six million lives insured Socio-economic upliftment through education Broader inclusion and economic participation Reduced regulatory fines and penalties Understanding the needs, concerns and priorities of our stakeholders A trusted industry participant Motivated and skilled workforce Lower risk of fraud and poor productivity Transformation Reduced employee turnover ENHANCED FINANCIAL, BRAND, INTELLECTUAL AND HUMAN CAPITAL tco 2 e of emissions 34% of waste recycled across the group, including shopping centres Energy and water efficiency programmes Enhanced environmental awareness Reduced environmental footprint Environmental influencer at investment properties REDUCED NATURAL AND FINANCIAL CAPITALS

23 Liberty Holdings Limited Integrated Report GOVERNANCE AT LIBERTY GOVERNANCE AT LIBERTY We believe effective corporate governance creates and preserves value 2017 governance highlights Implementation of the King IV Report on Corporate Governance for South Africa 2016 (King IV) was a key focus in Existing governance practices at Liberty were compared to the principles and desired outcomes contained in King IV and enhanced as necessary. Evidence of the application of King IV is included in the suite of reports published by Liberty. Enhancements to further improve delivery of the desired governance outcomes continue to be sought. The board updated its gender diversity policy to more specifically articulate Liberty s approach to the promotion of diversity on the group s South African boards of directors. GOV For further, detailed information on governance at Liberty please refer to the full Governance at Liberty report available at Statement of compliance The board subscribes to full compliance with applicable laws and regulations in the jurisdictions in which it operates. The board has embraced King IV. As recommended by King IV, Liberty has provided a narrative based report, referencing each of the King IV principles and an explanation of the practices employed to apply the principles. This report is available at KIV King IV was applied in its entirety except for a single practice that was not adopted. This is detailed below: During 2017, Liberty was compliant in all material respects with the requirements of the Companies Act No. 71 of 2008, the Companies Act Regulations, the FSB board notice 158 of 2014 Governance and Risk Management Framework for Insurers and the Listings Requirements of the JSE Limited. Complying with all applicable legislation, regulations, standards and codes is integral to the group s culture and imperative to achieving our strategy. The board delegates responsibility for compliance to management and monitors this through the compliance control function. The compliance management committee assesses the impact of proposed legislation and regulation and any other material regulatory issues are escalated to the group control and risk oversight committee and thereafter the group risk committee. During 2017, no material breaches were identified that require separate disclosure. KING IV RECOMMENDED PRACTICE The chair of the governing body may be a member of the social and ethics committee but should not be its chair. Principle 7, Note 36(e) LIBERTY S RESPONSE At this stage the board believes that the chairman of the board is the most qualified person to chair the social, ethics and transformation committee due to his experience in the matters considered by the committee.

24 20 Liberty Holdings Limited Integrated report 2017 GOVERNANCE AT LIBERTY Governance approach Liberty s governance structures and processes provide for sound and prudent management and oversight of the group s businesses in the interests of customers, shareholders and other stakeholders. The structures and processes support and enhance the ability of those responsible for the governance of Liberty (the board, senior management and heads of key functions) to manage Liberty s businesses effectively. Liberty s governance structures and processes add value for all our stakeholders by: Enhancing our understanding of the risks faced by the business Ensuring the upside from higher return opportunities is balanced with appropriate recognition of the cost of taking risks Ensuring that capital and resources are strategically focused on activities that generate the greatest value Board accountability and delegation The board is ultimately accountable for the effective governance of Liberty. It is the responsibility of the board to ensure that clearly defined roles and responsibilities for its various committees, subsidiary boards, the group chief executive (supported by the group executive committee) and key functions are in place. The performance of the board and its committees is evaluated periodically against their respective mandates and the results are collated by independent assurance providers. Feedback is provided to the directors affairs committee and thereafter to the board. Code of ethics The board subscribes to the highest levels of professionalism and integrity in conducting Liberty s business and in dealing with stakeholders. All Liberty employees and representatives are expected to act in a manner that inspires trust and confidence from the public. The board has approved a formal code of ethics that prescribes the group s approach to business ethics and its obligations to customers, shareholders, employees, representatives, suppliers, the public and authorities. Management is tasked with ensuring compliance with this code. The company secretary The company secretary, currently JM Parratt, is required to provide the directors of the company, collectively and individually, with guidance on their duties, responsibilities and powers. She is also required to ensure that all directors are aware of legislation relevant to, or affecting, the company and to report at any meetings of the shareholders of the group or of the company s directors any failure to comply with such legislation, including the JSE Listings Requirements. The company secretary is required to ensure that minutes of all shareholders meetings, directors meetings and the meetings of any committees of the board are properly recorded and that all required returns are lodged in accordance with the requirements of the Companies Act. In compliance with section 3.84(j) of the JSE Listings Requirements the board has considered and has satisfied itself that the company secretary is competent, appropriately qualified and experienced to fulfil her role as company secretary of the group. Furthermore, the board is satisfied that the company secretary maintains an arm s length relationship with the board of directors. The company secretary is not a director of the company. Statement of going concern The board concluded and expressed in its responsibility statement of the 2017 annual financial statements, that the group is a going concern. The 2017 interim and annual financial statements were prepared on this basis.

25 Liberty Holdings Limited Integrated Report GOVERNANCE STRUCTURES AT LIBERTY GOVERNANCE AT LIBERTY The board applies responsible governance in managing the business within the approved risk appetite through various committees and subsidiary boards to provide an appropriate level of assurance for the proper control and conduct of the group's affairs. The boards and standing committees depicted below are appointed under the guidance of the group directors affairs committee. BOARD OF DIRECTORS STANLIB board Liberty Two Degrees board * Liberty Kenya Holdings board * Remuneration committee Group audit and actuarial committee Group risk committee Directors affairs committee Social, ethics and transformation committee Group IT committee Remco GAAC GRC DAC SET GITC Group actuarial committee GAC Significant transactions committee Related party committee Other subsidiary boards Subsidiary internal review committees (where appointed) STC * Listed subsidiaries Liberty Two Degrees and Liberty Kenya Holdings PLC operate their own governance structures and processes which are in conformance with Liberty's governance standards. RPC The functions and responsibilities of each of the committees reflected above are documented and governed by official mandates. These mandates are available at External auditors For 2017, PricewaterhouseCoopers Inc. (PwC) was Liberty s lead independent firm of external auditors, appointed to LHL and many of the group s subsidiaries. Certain of the group s subsidiaries are audited by SizweNtsalubaGobodo or in certain African territories by KPMG Inc. The group audit and actuarial committee (GAAC) is satisfied with the continued independence of PwC and the audit partner and will recommend to shareholders at the May 2018 annual general meeting that PwC is re-appointed as the group s lead external audit firm for 2018.

26 22 Liberty Holdings Limited Integrated Report 2017 GOVERNANCE AT LIBERTY GOVERNANCE STRUCTURES AT LIBERTY (CONTINUED) BOARD OF DIRECTORS (at 1 March 2018) 2 2 REMCO DAC SET STC GITC Jacko Maree (62) BComm (Stellenbosch), MA (Oxford), PMD (Harvard) NON-EXECUTIVE CHAIRMAN Appointed January 2015 Areas of expertise and contribution: Banking, insurance, governance, HR and remuneration, sub-saharan Africa. Other directorships of listed entities: Standard Bank Group Limited (Deputy Chairman) REMCO GAAC DAC SET STC RPC Angus Band (65) BA, BAcc (Wits), CA(SA) LEAD INDEPENDENT DIRECTOR Appointed November 2008 Areas of expertise and contribution: Management, governance, insurance, finance and remuneration. Other directorships of listed entities: Liberty Two Degrees (Chairman) 1 Santie Botha (53) BEcon (Hons) (Stellenbosch) INDEPENDENT DIRECTOR Appointed August 2013 Tony Cunningham (62) MA (Cambridge) INDEPENDENT DIRECTOR Appointed February REMCO SET DAC GITC Areas of expertise and contribution: Marketing, sales, strategy, business intelligence, governance. Other directorships of listed entities: Curro Holdings Limited (Chairman) 1, Famous Brands Limited (Chairman) 1, Telkom Limited GAAC GAC GRC Areas of expertise and contribution: Actuarial science, international liability management, strategic and liability driven investment, transaction liability management, property investing. Monhla Hlahla (54) Nooraya Khan (48) BA (Honours) (Pomona College), MA (UCLSA), AMP (INSEAD) BComm (Natal), BCompt (Honours) (Unisa), CA(SA) INDEPENDENT DIRECTOR Appointed August 2012 INDEPENDENT DIRECTOR Appointed 15 December SET 25 Areas of expertise and contribution: Negotiation, budgeting, business planning and operations management. Yuresh Maharaj (40) BComm (Honours) (Natal), CA(SA) <1 GAAC <1 GRC BOARD AREAS OF EXPERTISE Areas of expertise and contribution: Financial structuring, risk management, project finance, private equity and venture capital. Other directorships of listed entities: Delta Property Fund Limited 1 68 YEARS OF LIBERTY EXPERIENCE <1 <1 FINANCIAL DIRECTOR Appointed 12 February 2018 Areas of expertise and contribution: Accounting, insurance, governance and financial reporting. 8 Governance 7 Insurance Accounting 5 Remuneration 4 Banking 4 Human resources 4 sub-sharan Africa 4 Strategy 2 Actuarial science 2 GRC REMCO Remuneration committee GAAC Group audit and actuarial committee GAC DAC Directors affairs committee SET Social, ethics and transformation committee Group actuarial committee The GAC is a sub-committee of the GAAC GRC Group risk committee GITC Group IT committee STC Significant transactions committee RPC Related party committee Chairman Completed years of service Liberty Holdings Limited board Completed years of service Liberty Group Limited board

27 Liberty Holdings Limited Integrated Report GOVERNANCE AT LIBERTY David Munro (46) BCom PDGA (UCT), CA(SA), AMP (Harvard) GROUP CHIEF EXECUTIVE Appointed 15 February 2017* Areas of expertise and contribution: Insurance, banking, law, governance, sub-saharan Africa. Appointed to the board on <1 < February 2017 and became the group chief executive on 30 May Carol Roskruge Cele (45) MSc (KZN), MBL (Unisa SBL) INDEPENDENT DIRECTOR Appointed 1 December 2016 Areas of expertise and contribution: Supply chain, procurement, strategy, commercial and governance. SET GITC SET Sibusiso Sibisi (62) Yunus Suleman (60) BSc (Imperial College, London), PhD (Cambridge) BCom (Atg) UDW, BCompt (Hons) (Unisa), CA(SA) INDEPENDENT DIRECTOR Appointed November 2008 INDEPENDENT DIRECTOR Appointed August GRC DAC GITC Areas of expertise and contribution: Management, insurance, mathematical and computational modelling GAAC GAC GRC STC Areas of expertise and contribution: Accounting, banking, fast moving consumer goods and telecoms in Africa. Other directorships of listed entities: Tiger Brands Limited 1, Gold Fields Limited 2. Jim Sutcliffe (61) Sim Tshabalala (50) 8 8 REMCO GAAC GAC GRC RPC BSc (UCT), FIA INDEPENDENT DIRECTOR Appointed September 2009 Areas of expertise and contribution: Actuarial science, asset management, insurance, HR and remuneration, governance. 4 4 REMCO DAC STC BA LLB (Rhodes), LLM (Notre Dame USA), HDip Tax (Wits), AMP (Harvard) NON-EXECUTIVE DIRECTOR Appointed April 2013 Areas of expertise and contribution: Insurance, banking, law, HR and remuneration, governance, sub-saharan Africa. Other directorships of listed entities: Standard Bank Group Limited 1. NUMBER OF DIRECTORS INDEPENDENT DIRECTORS GENDER BALANCE DIVERSITY AVERAGE AGE 69% 31% 54% INDEPENDENT DIRECTORS 4 FEMALE 9 MALE 7 DIRECTORS ARE BLACK YEARS 1 Listed on the JSE. 2 Listed on the JSE, the New York Stock Exchange and the Swiss Exchange. (** ) Denotes age as at 31 December 2017